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Correspondence audits on the increase

Georgia taxpayers who earn more than $1 million per year may be less likely to face an in-person or field IRS audit but might be significantly more likely to be audited by mail, also known as a correspondence audit. The IRS has always focused on auditing taxpayers with higher incomes, but it has shifted its focus to correspondence audits. This is in part due to a drop in staffing at the agency. Correspondence audits are less costly.

A correspondence audit might be triggered by a self-employed person claiming deductions on Schedule C or by itemized deductions on Schedule A. Listing rental losses and income on Schedule E may also trigger an audit. Taxpayers who make these claims should be prepared to substantiate them with paperwork.

In many ways, a correspondence audit can be more difficult than a field audit. One enrolled agent represented a client on a 2013 audit requested a field audit in hopes of being able to explain things to a person but was turned down. After submitting a great deal of paperwork, the agent still has not received a clear answer regarding what medical expenses are being questioned. She is now considering taking the case to the U.S. Tax Court.

A person who is facing either a correspondence or field audit may want to discuss the situation with an attorney. For example, the person might be self-employed and the IRS may question some of the expenses. Even if the person has ample documentation for those expenses, working with an attorney may be helpful in interpreting the information the IRS is requesting.

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